Consult your Lawyer Before You Terminate a Contract Due to the Covid-19 Crisis.

March 20th, 2020 | Community Association Law Blog

By Eric F. Frizzell

Understandably, property managers and community association boards are talking about canceling various contracts (e.g., for non-emergent projects, for the pool season) due to the coronavirus Covid-19. However, be sure to consult with your association’s attorney before “canceling” or “terminating” a contract. Even though we are in the midst of the coronavirus Covid-19 crisis, you may not have the legal right to just unilaterally “cancel” a contract, and by doing so you may be exposing the association to a breach of contract lawsuit.

Confer with your attorney about appropriate steps, which may include: (1) seeking the voluntary cooperation and written agreement of the other party to the contract to cancel it, or to modify it to address current conditions in a mutually acceptable way; (2) invoking a termination without cause provision, if the contract contains one; (3) considering whether you may have a basis for terminating the contract unilaterally under various NJ legal doctrines such as “frustration of purpose”, “impossibility of performance” and/or “force majeure”.

We are definitely all in this together, and we hope that everyone will be cooperative with one another on these kinds of issues. But financial pressures and other factors could influence a service provider to take a hard-line stance if you terminate a contract without legal basis to do so, and could cause them to assert that you breached the contract any must pay them.

Please let us know if we can assist you in any way.